Financial risk-taking and trait emotional intelligence

Abstract

Purpose

The purpose of this paper is to study the relationship between financial risk-taking and trait emotional intelligence (EI).

Design/methodology/approach

An incentivized online survey was conducted to collect the data, including measurements for cognitive ability and socio-demographic characteristics.

Findings

There is a positive correlation between trait EI and financial risk-taking that is at least as large as that between risk-taking and measures of cognitive control (CRT). Trait EI is a key determinant of risk-taking. However, not all components of trait EI play an identical role. In fact, we observe positive effects of well-being, mainly driven by males and sociability. Self-control seems to matter only for males.

Research implications/limitations

This study suffers from the bias of self-reported answers, a common limitation of all survey studies.

Practical implications

This evidence provides a noncognitive explanation for the typically observed heterogeneity of financial risk-taking, in addition to more established explanations linked to cognitive skills. Investor profiles should be also determined on their trait EI.

Social implications

Governments should start programs meant to improve the level of trait EI to ameliorate individual wealth outcomes. Female investors participation in the financial markets might increase by fostering their sociability.

Originality/value

The relationship between trait EI and each of its components with financial risk-taking is vastly unexplored, while it is the first time that gender effects are discussed in that set up.

Citation

Bucciol, A., Guerrero, F. and Papadovasilaki, D. (2021), "Financial risk-taking and trait emotional intelligence", Review of Behavioral Finance, Vol. 13 No. 3, pp. 259-275. https://doi.org/10.1108/RBF-01-2020-0013